Top steel producers like SAIL, Tata Steel, JSW and Essar have decided to maintain status quo on steel prices even as the three-month price freeze ends today. Industry sources said they have decided to keep prices on hold as of now since inflation is ruling at a 13-year high of 11.98 per cent and any increase would aggravate the situation.
The industry had agreed to a three-month price freeze after a price cut of Rs 4,000 a tonne following a meeting with Prime Minister Manmohan Singh on May 7. Consequently, domestic steel prices today are cheaper by Rs 10,000-15,000 a tonne compared with international prices.
Minister of State for Steel Jitin Prasada said the government is in regular talks with the steel companies to ensure that they do not take any step that might affect the general public and trigger further inflation.
Stocks of leading steel companies today took a beating at the Bombay Stock Exchange (BSE), even as the Sensex rose by over 112 points. Share price of SAIL slipped 3.44 per cent to close at Rs 146.15, Tata Steel closed at Rs 645.65, down 4.48 per cent, while JSW lost 5.69 per cent to close at Rs 789.10. These three players have a combined weight of 40.5 per cent in the BSE metal index, which also declined 3.06 per cent to close at 12,859.19 points.
“We are waiting for inflation to cool down. Whenever it happens, the pressure on the steel sector will ease. Companies might be able to take a call on prices then,” said steel industry sources, adding that there has been a cost increase of Rs 5,000-7,000 for every tonne of steel since May due to rise in prices of coking coal, scrap, ferro manganese and other inputs.
Notably, this is excluding the impact that is due from a revision in long-term iron-ore contract prices by NMDC. The revision, whenever it happens, will be effective from April.
Even the cement companies, which agreed to hold prices for a three-month period on May 14, are unlikely to hike prices at the end of the moratorium next week. Leading players like Ambuja Cement and ACC told Business Standard last week that the current market conditions (lower demand owing to rains) do not support a price hike.
This is good news for the government, which is battling to contain inflation. Steel (including iron) has a weight of 3.64 per cent in the wholesale price index, while cement has a weight of 1.73 per cent.
